Monthly Economic Update November 2015
Relative to dramatic gains in October, global investment markets were largely in a holding pattern in November. The outcome of upcoming December monetary policy meetings of both the U.S. Federal Reserve and the European Central Bank (ECB) were front and center in the minds of investors. Likewise, the November jobs report and an influential OPEC meeting, each scheduled for early December, added to uncertainty. All told, investors had little appetite for big investment bets, and currency driven weakness of international investments was the month’s most meaningful issue.
Investors expect a more accommodative ECB juxtaposed against the start of a tightening campaign by the U.S. Federal Reserve. This near-term divergence of monetary policy â€” the first in quite some time â€” has driven heightened investor angst and accounts for the dollar strength previously mentioned.
In terms of economic data, U.S. labor market strength is supportive of Fed tightening. Other metrics, such as manufacturing data, inflation, and consumer confidence, have exhibited weaker trends. The November payrolls report will likely be the ultimate driver of Fed action in mid-December. As for the ECB, strong talk will need to be backed up by commensurate action. Markets, increasingly expectant of aggressive action, will otherwise be disappointed.
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